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A. Oxygen Optimization is considering buying a new purification system. The new system would be purchased today for 16,000 dollars. It would be depreciated straight-line to 1,200 dollars over 2 years. In 2 years, the system would be sold and the after-tax cash flow from capital spending in year 2 would be 2,100 dollars. The system is expected to reduce costs by 4,700 dollars in year 1 and by 13,000 dollars in year 2. If the tax rate is 50 percent and the cost of capital is 9.2 percent, what is the net present value of the new purification system project

B.What is the NPV of project A? The project would require an initial investment in equipment of 88,000 dollars and would last for either 3 years or 4 years (the date when the project ends will not be known until it happens and that will be when the equipment stops working in either 3 years from today or 4 years from today). Annual operating cash flows of 29,040 dollars per year are expected each year until the project ends in either 3 years or 4 years. In 1 year, the project is expected to have an after-tax terminal value of 57,840 dollars. The cost of capital for this project is 5.76 percent.

C Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 310,000 dollars today. The equipment would be depreciated straight-line to 40,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 48,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 252,000 dollars and relevant costs are expected to be 97,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 8.71 percent. What is the NPV of the project?

?(New project analysis?)? Garcia's Truckin' Inc. is considering the purchase of a new production machine for ?$250,000. The purchase of this machine will result in an increase in earnings before interest and taxes of ?$40,000 per year. To operate the machine? properly, workers would have to go through a brief training session that would cost ?$4,000 after taxes. It would cost ?$8,000 to install the machine properly.? Also, because this machine is extremely? efficient, its purchase would necessitate an increase in inventory of ?$20,000. This machine has an expected life of 10 ?years, after which it will have no salvage value.? Finally, to purchase the new? machine, it appears that the firm would have to borrow? $100,000 at 8 percent interest from its local? bank, resulting in additional interest payments of ?$8,000 per year. Assume simplified? straight-line depreciation and that the machine is being depreciated down to? zero, a 31 percent marginal tax? rate, and a required rate of return of 12 percent.

a. What is the initial outlay associated with this? project?

b. What are the annual? after-tax cash flows associated with this project for years 1 through? 9?

c. What is the terminal cash flow in year 10 ?(what is the annual? after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the? project)?

d. Should the machine be? purchased?

Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 14,000 dollars. It would be depreciated straight-line to 1,400 dollars over 2 years. In 2 years, the oven would be sold for an after-tax cash flow of 2,600 dollars. Without the new oven, costs are expected to be 10,000 dollars in 1 year and 19,900 in 2 years. With the new oven, costs are expected to be 1,500 dollars in 1 year and 17,100 in 2 years. If the tax rate is 50 percent and the cost of capital is 9.75 percent, what is the net present value of the new oven project?

Noah Industrial, Inc. is considering a new project. The project will require $800,000 for new fixed assets. There is a total of $6,000 combined increase in inventories and account receivables and $2,000 increase in account payables. The project has a 6-year life. The fixed assets will be depreciated using 5-year MACRS to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 4 percent of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of 9,500 units and the selling price per unit is $250 while the variable cost per unit is expected to be $160. Annual fixed costs are expected to be $30,000. The tax rate is 35 percent and the required rate of return (cost of capital) is 13 percent. Calculate the project’s initial investment costs, annual operating cash flows and terminal cash flows. What are project’s NPV and IRR?

1. On the 1 January 2014, Lucky Limited opened a new plant in New Delhi. The following costs were incurred during January 2014 with regards to the new PPE, excluding taxes:

invoiced price of the PPE     60 000 000

• costs of testing of plant to ensure that it is operating in the manner intended by management 2 000 000

• proceeds from the sale of the goods produced in testing (600 000)

• costs incurred in selling the scrap produced during testing 100 000

plant opening function for dignitaries, staff and clients 1 000 000

Starting 1 February 2014, the plant was ready to operate as intended by the management. The plant incurred an operating loss of $5 000 000 for the month ended 28 February 2014, primarily due to initial low orders levels. Production levels reached break-even point in early March 2014, and thereafter the plant operated profitably.

Compliance body requires that the business site where the plant is developed be rehabilitated by Lucky Limited at the end of the plants useful economic life that has been reliably estimated at 10 years. On the 1 January 2014, an environmental restoration provision of $1 million was, in accordance with IAS provisions, raised.

Required:

a. Calculate the cost of the PPE in accordance with IAS 16.

b. Explain the implication of your answer

1. Mighty Manufacturing is considering investing $600,000 in a new production line. The new equipment is expected to generate a savings of $200,000 per year for each of the next five years. Mighty’s cost of capital is 5 percent. What is the net present value of the investment in the new production line? Disregard the effect of depreciation and taxes.

A. $565,880.

B. $456,980.

C. $265,880.

D. $650,490.

2. Parts Equipment Company is evaluating a plan to refit its machinery. The expected cost is $75,000, payable immediately. The expected reduction in cash outflow at the end of each year is as follows:

Years 1 – 3 $60,000 each year

Year 4         $25,000

If the interest rate is seven percent, what is the net present value of this investment in new machinery? Disregard the effect of depreciation and taxes.

A. $101,530.

B. $150,596.

C. $-124,094.

D. $-16,093.

4. When the net present value (NPV) method is used, an acceptable proposal is...

A. Projected cash inflows have a present value greater than the present value of the required outflows.

B. Rate of return exceeds the minimum acceptable rate of return.

C. Rate of return exceeds the current bank lending rate.

D. Rate of return is limited to the current bank lending rate.

5. Big Manufacturing Company is considering

purchase of a new facility. The following factors apply:

• $250,000 initial investment

• 10 year life of facility (no salvage value)

• $80,000 differential cash revenues from the purchase

• Annual expected flood losses to facility are $15,000

• Straight-line depreciation is used

• 40 percent tax rate

• Minimum annual acceptable rate of return is 10 percent Present value of $1 received at the end of each year for 10 years at 10 percent is

6.1446

A. $85,093.

B. $75,663.

C. $35,215.

D. $87,215.

I need the right answer please!!

Birnham Motors is considering adding a new location to their existing car lots. The new facility will cost $12.7 million to construct. Management uses a discount rate of 10.9%. They anticipate the following cash flows for next seven years:

The proposed project's net present value is closest to:

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Blossom Corp. purchased machinery for $381,450 on May 1, 2020. It is estimated that it will have a useful life of 10 years, salvage value of $18,450, production of 290,400 units, and working hours of 25,000. During 2021, Blossom Corp. uses the machinery for 2,650 hours, and the machinery produces 31,400 units.

From the information given, compute the depreciation charge for 2021 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 45,892.)

I've looked at other answers and still don't understand how to do these 3 correctly. Thank you in advance!

X Corporation exchanged a warehouse located in New York for a warehouse located in New Jersey. The adjusted basis of the New York warehouse was $30,000. The fair market value of the New Jersey warehouse just prior to the exchange was $25,000. In addition to the warehouse, X Corporation also received $8,000 in cash.

54.     The amount realized by X Corporation is:

The gain realized by X Corporation is:

The gain recognized by X Corporation on the exchange is:

The basis for X Corporation in the property received, the warehouse in New Jersey, is:

Trademark Inc. is planning to set up a new manufacturing plant in New York to produce safety tools. The company bought some land six years ago for $4.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would sell for $4.6 million on an after-tax basis. In four years, the land could be sold for $4.8 million after taxes. The company hired a marketing firm to analyze the market at a cost of $250,000. Here is the summary of marketing report: We believe that the company will be able to sell 5,600, 6,300, 7,200, and 5,900 units each year for the next four years, respectively. We believe that $550 can be charged for each unit. We believe at the end of the four-year period, sales should be discontinued. The company believes that fixed costs for the project will be $615,000 per year. Variable costs are $462,000, $519,750, $594,000, 486,750 each year for the next four years, respectively. The equipment necessary for production will cost $2.5 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $450,000. Net working capital of $325,000 will be required immediately. The company has a 21 percent tax rate, and the required return on the project is 9 percent.

Which of the following is true

$250,000 is an incremental cash flow and it will be part of the total project cash flow of year zero as an outflow.

$4,300,000 is an incremental cash flow since it is the original cost of land.

$4,800,000 is an opportunity cost and it will be part of the project cash flow of year zero as an outflow.

$4,600,000 is an opportunity cost and it will be part of the total project cash flow of year zero as an outflow.

$4,300,000 and $250,000 are sunk costs and they will be part of the total project cash flow of year zero as outflows.

What is the Year 2 depreciation expense

$833,250

$370,250

$185,250

$1,111,250

$370,379.63

What is the after-tax cash flow from the sale of the equipment?

$450,000

$185,250

$555,500

$355,500

$94,500

What is the capital spending cash flow of Year 0 and Year 4

Year 0:$2,500,000, outflow / Year 4:$4,800,000, inflow

Year 0:$7,100,000, outflow / Year 4:$5,155,500, inflow

Year 0:$7,100,000, outflow / Year 4:$5,250,000, inflow

Year 0:$6,800,000, outflow / Year 4:$5,155,500, inflow

Year 0:$2,500,000, outflow / Year 4:$355,500, inflow

What is the operating cash flow at Year 4?

$2,074,260.00

$1,732,070.00

$2,140,150

$2,251,042.50

$1,757,352.50

What is the project's NPV? Should you accept or reject the project?

(NO CHOICES)